Santos and Mike Rann: redefining “philanthropic giving” in Australia?

This is an expanded version of a piece that was published in Crikey on Monday 25th January.

Yesterday’s conclusion of the Tour Down Under (the Tour) cycling race in Adelaide was a triumph not only for the eventual winner, the German rider and now two-time winner of the Tour, Andre Greipel (see picture above), but also for South Australian Premier Mike Rann and the first-time commercial sponsor of the Tour, South Australian-based energy company Santos.

In the coming weeks Rann and his Tourism Minister Jane Lomax-Smith will make all manner of claims about the economic benefits that the Tour bought to their state as they run up to what will be the Labor Party’s first test of electoral favour in a big polling year.

Local pundits – and Crikey – have tipped that Rann’s two-term government will be returned for a third term – in large part because of his relentless bread and circuses campaign in the lead up to the March poll but also because Opposition leader Isobel Redmond’s hapless Liberal Party just cannot get their act together to present anything vaguely resembling a viable alternative.

And Santos? For the last three years the Tour was operating without a major sponsor – meaning that Rann’s government had to carry the weighty financial can for the operational costs each year – and attracted substantial political heat for its failure to find a major sponsor.

In late August 2009 Santos announced that it would become the “naming rights” sponsor for the Tour through to 2013.

But more than a few in South Australia were curious about several aspects of the Santos deal.

One thing that was distinctly unusual about Santos’ announcement was the absence of a money figure – usually big corporate’s are more than keen to get the biggest bang for their buck from such an important statement.

Santos Chief Executive Officer David Knox said on his announcement:

“Not only is the Tour enjoyed by hundreds of thousands of people across the state, it has a significant positive economic impact on the local economy. Santos is pleased that this sponsorship will help increase those economic benefits to the community.”

And it is this last reference to “community” that also caught a few eyes – largely because of an extraordinary story in Australian corporate history.

For this we have to take a short traverse through Santos’ recent past.

Back in the late ‘70s Santos was a mid-sized gas company conservatively run by old-school directors who suddenly had to face the aggressive Alan Bond, who had, as the Adelaide-based Independent reported last year:

…a prescient eye for a bargain, [and] had snapped up 37 per cent of Santos from the Burmah Oil Company of the UK. Burmah was run by Margaret Thatcher’s husband, Denis, and had run into financial difficulties.

In 1979 the then Corcoran state government legislated a 15 per cent cap on share ownership that was specifically targetted at Bondy, who subsequently sold down his 37 per cent in Santos – at a tidy profit.

From 1979 to 2008 Santos was a rare entity in the Australian corporate world – a protected species the subject of specific state legislation.

But that protected status wore thin in the very different commercial climates of the last two decades and for some time Santos management had been lobbying fiercely for its protected species status to be repealed.

In this it was successful, and in mid-October 2007 it entered into a “Deed of Undertaking” with Rann that was subsequently reflected in legislation introduced into the South Australian parliament later that month by Minister for Energy, Pat Conlon, who noted the three important elements of the legislation and the Deed that it is based on:

– guarantees that effectively 90 per cent of the current South Australia-based roles stay here…This equates currently to approximately 1,700 jobs in South Australia;

– a $100 million legally enforceable compensation mechanism should there be a significant reduction in corporate presence; and

– a Social Responsibility and Community Benefits fund of some $60 million over 10 years to be applied to a range of sponsorships… indigenous programs and educational scholarships.

The categories of organisations and projects to which that money will be donated or used for sponsorship in South Australia are contained in clause 4.3(b) of the Deed:

It is this last element – the Social Responsibility and Community Benefits Fund (the CBF) worth $60 million – that is of immediate interest.

– scientific endeavour and research;

– indigenous employment and training;

– vocational and industry development;

– environment, sustainability and climate change;

– health and safety;

– education and training;

– youth affairs;

– arts and culture; and

– other community benefits.

I note that this list makes no mention of sporting events or carnivals, though it does contain the catch-all category of “other community benefits”.

Clause 4.4 requires that Santos report to Rann every twelve months confirming their compliance with the Deed and providing an outline of the proposed expenditure over the next 12 months.

Clause 4.3(c) contains the kind of get-out conditions that every good lawyer would seek to include in such a Deed in order to give Santos a degree of flexibility in how it disburses CBF funds:

“The specific…categories of organisations and projects in South Australia to which the Company [Santos] provides benefits may change over time…”
But clause 4.3(c) does contain further guidance as to how proposals for how money under the CBF will be assessed against Santos’ “standard philanthropic assessment and performance management criteria.”

And it is this element of the Deed that caught Crikey’s attention – on its face Santos has agreed with the government that it will donate $60 million over 10 years to organisations and projects that have at least some connection to philanthropic principles.

Philanthropy has many definitions – and I’m in the road and don’t have my Shorter Oxford dictionary to hand so cannot give a definitive meaning here – but the guiding principle of philanthropic giving is that it be money given, usually from a private or commercial source, to a project or organisation that will advance the public good.

And this is where we get back to Santos and its sponsorship of the Tour through to 2013.

On its face – and for the last week and more all over the streets of South Australia, the nation’s television screens and in all of the Tour’s publicity material – the sponsorship by Santos of the Tour appears to be nothing more than a straight-out commercial sponsorship.

Just the same as the Kia motor vehicles naming-rights sponsorship of the Australian Open tennis.

Crikey asked Santos, and Rann’s office, about the Santos sponsorship. We’ve heard nought from Rann’s office but Santos was good enough to respond to our questions.

Crikey asked Santos to:

“1 – Please advise of the money value of Santos’ sponsorship of the TDU on both an annual basis and over the course of the four year term.

2 – Please confirm whether or not the source of those sponsorship funds is the “Social Responsibility and Community Benefits Program” established pursuant to the October 2007 Deed. If not, what is the source of those funds?

3 – Please provide details of Santos’ “standard philanthropic assessment” – i.e. the usual criteria by which Santos would assess an application or grant within the categories of the “Social Responsibility and Community Benefits Program”.

4 – Please confirm whether it is correct or not that various payments, by way of attendance or similar fees, made to riders and/or teams competing in the TDU have been paid from the “Social Responsibility and Community Benefits Program” funds.

5 – Please provide copies of each annual Report to the Premier by Santos (as per Clause 4.4 of the October 2007 Deed of Undertaking), particularly in relation to the provision in Clause 4.4(2) that refers to “Santos’ proposed clause 4.3 expenditure” for the following 12 months.”

To Santos’ credit, it provided a lengthy response from Matthew Doman, its Manager of Corporate Communications, that reads in part:

“…Our 4-year partnership with the Santos Tour Down Under is a further addition to Santos’ substantial community program.
…
The Tour Down Under is a world class sporting event and we are pleased to support its substantial economic and community benefits for SA. Not only is the Tour enjoyed by hundreds of thousands of people across the State, it has a significant positive economic impact on the local economy. Santos is pleased that our sponsorship will help increase those economic benefits to the community.
We are also pleased to be associated with an event that reaches significant national and international audiences.
In response to queries below, I’d make the following points:
The value of our sponsorship remains commercial-in-confidence between Santos and the Tour’s owner, Events SA.
The sponsorship of the Tour is part of our agreement with the SA Government, but we have a well developed sponsorship program dating back 25 years.
…
Our assessment process takes into account the impact each opportunity will make on the wider community. Santos community program is generally focused on arts and culture, the environment, education, indigenous capacity building and community wellbeing.
Our sponsorship of the Santos Tour Down Under is directly to Events SA for the staging and marketing of this great event.
The annual report is a summary of the organizations or programs Santos has decided to support in the preceding 12 month period. The 2009 report covered six initiatives which have all been announced (refer attached media release). The 2009 report was submitted to the Premier prior to our decision to sponsor the TDU in August last year.”

From Santos’ answer to Crikey’s questions it is apparent that the source of the TDU sponsorship money is the CBF.

But, citing that old and increasing unconvincing saw that the details of the sponsorship are “commercial in confidence”, Santos declines to produce further details about how much it is giving to the Rann government’s Events SA to cover the costs of staging and publicising the TDU.

Santos also neglected to provide details of it’s “standard philanthropic assessment” policy or of its apparent failure to advise Rann of its proposed expenditure on sponsorship of the TDU through to 2013.

There have been various accounts buzzing around Adelaide of the actual amount that Santos is spending on the TDU over the next four years, from a low of about $4 million up to $15 million.

Right now nobody, let alone those organisations that might want a slice of the Santos “philanthropic” pie over the next few years, knows just how much money is left in that plate.

And right now it seems that the meaning of “philanthropic”, in South Australia corporate and government circles at least, is a work in progress.

Do you have a view on the changing face of philanthropy and/or commercial sponsorship in Australia?

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